I understand it like this. Essentially operating break even is the fixed costs divided by the profit per unit, whereas the net income is fixed plus interest divided by profit per unit. In other words net income break even included financing costs and operating doesn’t therefore NI break even is the only one affected by leverage, correct?
NI breakeven is affected by FINANCIAL leverage whereas operating breakeven is not(important distinction there). Operating breakeven is affected by operating leverage which is the amount of fixed costs you use. Total leverage = Operating leverage * financial leverage
Operating Breakeven = F / P - V It ignores the amount of leverage a firm is using.
p+v?
jmac01 Wrote: ------------------------------------------------------- > p+v? Should be P-V, sorry about that.
Ok, so when we go to calc break even, do we or do we not include interest?
Is depreciation included in BEP calculation? The curriculum does not bring it up. If bep= number of units at which Net Income is zero, then it would make sense to include depreciation in the bep calculation?